Natural Gas Price Declines After EIA Report

Key Insights

• Natural gas markets decline after the release of the EIA report. 
• The attempt to settle above $8.00 was not successful, and prices are moving towards the $7.50 level. 
• Problems at Freeport LNG will continue to put pressure on domestic markets.

The Storage Report Looks Bearish For Natural Gas Markets

Natural gas price moved lower after the release of the EIA Weekly Natural Gas Storage Report.  The report indicated that working gas in storage increased by 92 Bcf to 2,095 Bcf.

On June 14, natural gas markets found themselves under significant pressure after it became evident that Freeport LNG facility will not work anytime soon after the recent explosion. The resumption of partial operations is expected to take place in about three months.

However, natural gas has recently made an attempt to recover as some traders were willing to bet that warm weather will lead to higher natural gas demand and support prices despite problems at Freeport LNG.

The Recent Explosion At Freeport LNG Remains The Key Bearish Catalyst

While the report indicated that working gas in storage increased, it is 13.6% lower compared to levels that were seen a year ago. Compared to the five-year average, working gas in storage is down by 13.4%. In this light, further increases will be needed to calm markets.

In the near term, the explosion at Freeport LNG will remain the key bearish catalyst as it increases supply at domestic markets. Meanwhile, the remaining LNG export facilities will be maxed out given the huge spread between domestic prices and prices in Asia and Europe.

This spread will only increase after recent actions from Russia’s Gazprom, which cut gas supplies to European clients due to sanctions-related maintenance issues. In the longer-term, international markets would serve as bullish catalyst for U.S. natural gas markets, but it won’t happen until Freeport LNG is fully back to business.

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